Author: Debashis Bandyopadhyay

World over, listing of Initial Public Offering (IPOs) are taken as maturity of fledgling Small and Medium Enterprises (SMEs). But in India the story so far is different. SMEs with decades of good growth and pink financial health prefer to shun listing in the exchanges, may be due to valid reasons.

But during the last couple of months the picture is changing. Listings of the IPOs of some SMEs with huge premiums show that the investing communities are turning their attention to SMEs.

Even the retail investors, considered the most conservative one, are putting money 40 times of their quota in the IPOs of SMEs, in quite a few of them.

So far regulatory facilitations are concerned the two leading stock exchanges are operating their SME trading platforms with easier formalities for quite a decade but both of these remained nearly dormant due to least interest of investing public.

Actually, on ground, the situation is not that bad. BSE SME exchange has nearly 400 SMEs registered on its platform so far and out of which about 150 migrated to the main platform, an indication of their growth and about 100 are being regularly traded.

The BSE SME IPO index (https://www.bseindia.com/sensex/code/76 ) which measures performance of 50 leading SMEs on the exchange, has increased nearly 20 per cent during the last 3 months and almost doubled during last one year, an achievement the leading indexes will envy. Yes, the trading so far is thin and the liquidity cannot afford much investments but the environment is changing.

With valuation of Bluechip, even midcap company shares soaring to near unviable levels, risk prone investors focused first on small cap shares on the main exchange platforms and now on the SME exchanges.

Ready initial investments by high net worths is also facilitating more SME IPOs in the pipeline. A recent IPO of a SME hi-tech drone manufacturer had celebrity Bollywood personalities as anchor investors.

And the market is expected to increase when the large number of Start-ups launched in last couple of years will launch IPOs, many on the SME exchanges.

Will the picture be sufficiently conducive for more SMEs, particularly the growing established ones, to rush for listing? Probably not. Entrepreneurs are still concerned about real and perceived barriers in going for listing on exchanges.

Now it is the responsibilities of SME Associations and Chambers to organise interactive meetings of matured SMEs with potential anchor investors, traders, market makers and of course with the exchanges to facilitate listing of SMEs. For the growth of the Indian Small and particularly much neglected Medium sector, this is an imperative.

Disclaimer: The writer is a retired industrial advisor to Government of India. Views are personal.